Insight - Australian investment in Brazil is bigger than you think
By Greg Wallis, Consul-General and Senior Trade Commissioner, Austrade Brazil
A comprehensive stocktake of Australia’s business presence and investment position in Brazil recently completed by Austrade Sao Paulo provides compelling reading.
According to the Australian Bureau of Statistics, Australia has A$4.42 billion of FDI stock in Brazil and is the 15th largest destination for Australian FDI stock abroad.
What may also surprise many is this is more than Australia holds in India, Thailand, the Philippines, Korea, or Vietnam. However noting that with the inclusion of portfolio investments, the total investments by Australia in those countries are in most cases significantly more than they are in Brazil.
In spite of Australia's extensive mining interests in the region, Australia's FDI stock in Brazil is greater than that in the rest of Latin America combined. Why? Because, unlike much of the region, Australian investments in Brazil are highly diversified beyond those in the mining sector.
In addition to iron ore production and petroleum exploration, Australia has made big investments in renewable energy, logistics, online services, manufacturing, agribusiness, financial services, insurance and fashion retail in Brazil.
Macquarie, QBE, Goodman, BHP-Billiton, Brambles, Seek, Carsales, CottonOn, NuFarm, Karoon, Ansell, Amcor and Pacific Hydro are some of the major Australian investors.
Brazil was the sixth biggest recipient of FDI inflows globally in 2016 (Australia ranks 9th) with more than US$50 billion, even in the midst of the recession. This year, on current predictions, will see a lot more too.
No-one would suggest that Brazil has an easy environment for investors. It has a heavy bureaucracy and a taxation regime that is mind-boggling in its complexity that unfortunately elevates its Ease of Doing Business position to 125th globally.
Nevertheless, companies with global reach, usually dominant in their sector in Australia and can allocate the time and resources to overcome the entry pains, can and do succeed in Brazil.
Brazil is not easy to sell to Australian corporates, with relatively few of our major companies established in the US, Europe and Asia having taken the plunge into Brazil. Australian companies understandably prioritise these markets because they are easier and closer.
But if you accept that to be truly global means you also need to be in a market as big as Brazil, there is a lot of upside to this story from an Australian investment perspective.
It will take a return to sustained growth and the accompanying optimism about the future of the country for this to happen, and that scenario appears to be unfolding.
The Industrial Entrepreneur Confidence Index in Brazil rose for the fourth straight month in November, and GOP (Gross Operating Profit) growth of between 1.5 to 2.3 per cent is predicted for Brazil in 2018.
While it remains a long way from the heady days of 7.5 per cent growth in 2010, and an unpredictable election is coming in 2018, these are the best numbers since 2013.
For Australian corporates this is why Brazil may now be worth another look.
Visit the Austrade website to learn more about the business opportunities in Brazil or contact email@example.com